TaxTMI 
TaxTMI 
1983 (10) TMI 79
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....be treated as collection charges. Thirdly, it was claimed that since the assessee was assessed both on income from property and income from furniture, the latter as income from other sources, at least a proportionate portion of the expenditure for the latter source of income should be deducted. The ITO rejected the assessee's claim as this was neither a deductible item in the computation of property income nor collection charges incurred. This was, according to the ITO, on the contrary a capital expenditure incurred by the assessee. On appeal, the AAC confirmed the ITO's order. He held the expenditure was capital in nature. The alternative grounds also were rejected by him. Hence the appeal before the Tribunal. 2. The learned counsel for the assessee has pointed out that in accordance with the lease entered into on 2-8-1976, the house property along with furniture was leased out for a period of 9 1/2 years. Apart from the sum of Rs. 25 to be paid to the lessors per month, the other payments to be made were a sum of Rs. 24,275 as monthly rent, a sum of Rs. 12,150 per month as reimbursement of municipal taxes and all other taxes and outgoings and a sum of Rs. 4,050 per month as char....
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....ial restrictions such as the 6 per cent limit for collection charges. According to the learned counsel, therefore, there is a clear indication that the principle of real income cannot be applied to computation of property income as otherwise there would have been no limit such as the 6 per cent limit for collection charges in working out the property income. The expenditure in the present case related to legal charges for drawing up a legal document in respect of the lease. This has a benefit for at least 9 1/2 years. There is no provision in the Act for grant of deferred expenditure over a period of 9 1/2 years. A proportionate portion cannot also be allowed as collection charges since the allowance of the latter depends on actual incurring of collection charges. The stamp charges while they represent expenditure incurred for entering into an agreement to lease the property can, according to the learned counsel, be scarcely regarded as charges incurred for collecting the lease rent. The lease rent in fact comes in automatically though it has itself its source in the leasing of the property. With regard to the third contention that the expenditure should be bifurcated between the h....
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.... revenue. Hence, the resort to section 23(1)(b). As the above computation by the ITO would indicate, in taking the rent received by the assessee for the year, he has taken the figure of total receipts by way of monthly rent, reimbursement of municipal taxes, etc., but did not deduct the expenditure incurred by the assessee of Rs. 35,743 for drawing up the lease deed. In rejecting this claim for deduction, the ITO had named the item of expenditure as a capital item of expenditure. The AAC has also followed the same method. 7. In our view, the concept of capital expenditure versus revenue expenditure has no meaning or relevance in the computation of income from property. An item of expenditure can be disallowed or not allowed in the computation of income from a particular head only if it is specifically not allowable under the provisions of the Act. The capital expenditure as contrasted with revenue expenditure is not allowable under the Act only with regard to the computation of income from business or income from other sources and not with regard to property income. If we, therefore, regard the finding of the ITO or the AAC that this item of expenditure of Rs. 35,743 his applying ....
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....nt received by the lessor would be only Rs. 25,000--5,000--2,000--3,000, i.e., a net amount of Rs. 15,000 and not the original amount of Rs. 25,000. This is what exactly the learned counsel for the assessee has referred to as 'real income' basis for ascertaining the rent receipt. We see nothing wrong in accepting this argument. What the lessor receives as rent would be what flows into his hands as net figure of money and not the gross amount out of which he has to incur so many items of expenditure in connection with the letting out of the property. These are different from the allowances specified in section 24 of the Act. Thus, in the present case even though the lessor has received a sum of Rs. 4,24,155 under various heads, the net amount he receives from letting out the property will be less by a sum of Rs. 35,743 which he had to spend during the year by way of stamp fees, etc. In computing the income from property by resorting to the provisions of section 23(1)(b), viz., the actual receipt of rent for the year, certainly the sum of Rs. 35,743 which indisputably goes out from the assessee's hands in connection with the letting is to be deducted. We leave open the question wheth....
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....3(1) in its amended form which is applicable to the year under appeal reads as follows : " For the purposes of section 22, the annual value of any property shall be deemed to be (a) the sum for which the property might reasonably be expected to let from year to year ; or (b) where the property is let and the annual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable. " As rightly held by my learned brother, the assessment in the present case in respect of the property income has been made under section 23(1)(b) and not under section 23(1)(a). Under this provision of law, if the annual rent received or receivable by the owner of the property is in excess of the sum referred to in clause (a) of section 23(1) then the actual amount of rent so received or receivable by the owner has to be taken into account. The question for our consideration is what is the actual amount received or receivable by the assessee as the annual rent for the property in the year in question. Though the actual amount of rent received by the assessee is the amount specified in the lease deed it will be the gross ....
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....of lease is entered into between a landlord and tenant, no new source of income is brought into being. " I am unable to see any reason as to why the ratio of this decision will not apply to the facts of the present case before us. The other decision of the Bombay High Court in Cinceita (P.) Ltd.'s case, is not directly in point and is of no assistance in deciding the issue in the present case. I would, therefore, respectfully follow the decision of the Bombay High Court in the case of Khandelwal Mining & Ores (P.) Ltd., referred to above and hold that the assessee would be entitled to this deduction of these expenses of Rs. 35,743 under section 23(1)(b) itself. 5. Apart from the above, these expenses would be admissible on the same parity of reasoning by which service charges of Rs. 11,664 paid by the assessee to the housing society for various services like security, passage light, operation of lift, and services of sweepers, etc., have been allowed by the AAC in paragraph 3 of his order. It is not disputed that there is no provision under section 24 which would entitle the assessee to get this deduction. However, this has been allowed not only in this case but in quite a number....